It increasingly looks as if the proposed fibre to node (FTTN) broadband network will be one with competition at the services level, but little competition at the infrastructure level. The national broadband infrastructure will be provided by Telstra, as it looks uneconomic to provide a duplicated infrastructure.

If Telstra is the only option for building the national broadband network (NBN), then it does not appear likely that Telstra will be structurally separated into a wholesale business and a retail business to prevent monopoly behaviour. It also looks as if the private investment in broadband will be for the metro areas, with the national government required to subsidize broadband for rural and regional Australia.

The implication of these political and economic realities is that national retail broadband prices will probably rise should Telstra construct a monopoly-owned FTTN network. Telstra will act to feather its own nest. The market logic is clear: a privatised Telstra would pursue its shareholders interests, the goal of which would be to maximise its monopolistic position in the market to ensure a good return on its investment.

Tasmania shows how it is done in terms of transmission costs across Bass Strait when broadband backhaul capacity across Bass Strait is limited to a monopoly supplier. This highlights the incompetence of the Lennon state government in ensuring that broadband infrastructure underpins Tasmania’s social and economic future. So Tasmania remains a digital backwater.

Given these realities there is a need to develop a regulatory regime aimed at reining Telstra in. How can this be done to ensure that in seven years we are not in an identical situation to today?